As I mentioned in a previous post, if recent trends continue this could end up being a lousy Christmas shopping season. Data released over the past two days make this outlook even more likely and point to the increased likelihood of further retrenchment in consumer spending during the fourth quarter. According to yesterday's GDP release, consumer spending fell at the fastest rate in 28 years in the third quarter and suggests the U.S. is slated for its first consumer-led recession since the lowly 1970s. More detailed data released this morning revealed a fairly broad-based decline in terms of what consumers were buying as durable (cars, appliances) and nondurable (food, clothing) goods both saw fewer purchases. Also, the personal savings rate, which is simply the difference between income and consumption, was above 1 percent for the second quarter in a row for the first time since 2004. Although far from a perfect measure of consumers' thrift, should this measure quickly rise to a level in the neighborhood of the 2001 recession things could get very ugly.


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